SOUTHERN CALIFORNIA GAS COMPANY - 2013

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2013 -2014 Energy Efficiency Programs Local Government Partnership Program Program Implementation Plan progress21. According to York 22, "Market transformation is not likely to be achieved without significant, permanent increases in energy prices. From an economic perspective, there are 3 ways to achieve market transformation: (1) fundamental changes in behavior, (2) provide proper price signals, and (3) permanent subsidy." The question of what constitutes successful transformation is controversial because of a Catch -22: Market transformation is deemed successful when the changed market is self - sustaining, but that determination cannot be made until after program interventions are ended. Often, however, the need for immediate energy and demand savings or immediate carbon- emissions reductions will mean that program interventions may need to continue, which would interfere with the evaluation of whether MT is self - sustaining. Market transformation success has also been defined in terms of higher sales of efficient measures than would have otherwise occurred against a baseline absent of program interventions. The real world, however, provides no such control condition. Evaluators must estimate these baselines from quantitative factors such as past market sales that may be sparse and /or inaccurate - particularly for new products. Evaluations must also defer to expert judgments on what these baselines may have been as well as on the degree of successful market transformation 23. Due to the subjective nature of these judgments, it is imperative that baselines as well as milestone MT targets be determined and agreed upon through collaborative discussion by all stakeholders, and these targets may need periodic revision as deemed necessary by changing context. Market transformation draws heavily upon diffusion of innovation theory 24, with the state of a market usually characterized by adoption rate plotted against time on the well -known S- shaped diffusion curve. In practice, however, the diffusion curve of products may span decades 25. Market share tracking studies conducted 3, 5 or even 10 years after the start of an MT program may reveal only small market transformation effects 26. The ability to make causal connections between these market transformation effects and any particular program's activities fades with time, as markets continually change and other influences come into play. These challenges mentioned above are in reference to programs that were specifically designed to achieve market transformation; and these challenges are only compounded for programs that were primarily designed to achieve energy and demand savings. However, since the inception of market transformation programs almost two decades ago, many lessons have been learned about what the characteristics of successful MT programs are. First and foremost, they need to be designed specifically to address market transformation. "The main reason that (most) programs do not accomplish lasting market effects is because they are not designed specifically to address this goal (often because of regulatory policy directions given " Gibbs, M, and Townsend, J. (2000). The Role of Rebates in Market Transformation: Friend or Foe. In Proceedings from 2000 Summer Study on Energy Efficiency in Buildings. 12 York, D., (1999). "A Discussion and Critique of Market Transformation ", Energy Center of Wisconsin. Available at http: / /www. eew,org /ecwrestilts/ 186 - I.pdf. 2 Nadel, S., Thorne, .J., Sachs, Ii, Prindle, B., and Elliot, R.N. (2003). "Market Transformation: Substantial Progress from a Decade of Work." American Council for an Energy - Efficient Economy, Report Number A036. Available at: http: / /www,aceee.org /pubs /a036full.pdf 24 Rogers (1995) Diffusion of Innovations, 5 °i Ed. 2' Example in bottom chart of this graphic from NYTimes: http : / /www.nytimes.com /imagepages/ 2008 /02/10/ opinion /1 Oop.graphic.ready.html 2fi Sebold et at (2001) p. 6 -5,